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Cablegate: Peru Trade and Investment Briefs - May 2008

VZCZCXRO9210
RR RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHNG
RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHPE #0956/01 1541900
ZNR UUUUU ZZH
R 021900Z JUN 08
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 8747
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 LIMA 000956

SIPDIS

COMMERCE FOR 4331/MAC/WH/MCAMERON
TREASURY FOR MMALLOY
USTR FOR BHARMAN AND MCARRILLO

E.O. 12958: N/A
TAGS: ETRD ECON EFIN USTR PE

SUBJECT: PERU TRADE AND INVESTMENT BRIEFS - MAY 2008


SUMMARY
-------
1. (U) This is an update on the following trade and investment news
from Peru:

TRADE
-- Peru signs FTAs with Canada and Singapore
-- Peru-China FTA May Be Completed in Two More Rounds
-- Peru and Chile Moving Closer to Finalizing FTA
-- Imports Registered a 47% Growth in April
-- Overall Increases in Textile Exports from 2007
-- Exports of Fish Products Grew 15.9% in March
-- Exports of National Software Grew 25% This Year
-- 18-25 Year Olds Buying More Electronics

INVESTMENT
-- Peru Attracts New Spanish Investment
-- French Businesses Look to Peru, Not Just Lima
-- Brazil and Peru Partner on Hydro electrical Project
-- Mitsui of Japan Plans to Construct Desalinization Plant
-- French, Austrian, and Czechs Interested in Water


Peru Signs FTAs with Canada and Singapore
-----------------------------------------
2. (U) On May 30, 2008, Peru and Canada signed a trade agreement
after ten months of negotiation. The Canada-Peru FTA will
immediately eliminate tariffs on 97 percent of Peruvian exports to
Canada, with the remaining tariffs to be phased out over three to
seven years. The deal also eliminates tariffs on 94 percent of
Canadian exports to Peru, with the rest to be lifted over a period
of five to 10 years. Peru's principal exports to Canada are gold,
copper, asparagus and fishmeal, while its major imports are grains,
machinery, electrical equipment, leguminous vegetables and paper.
Peru and Canada also signed a cooperation agreement on labor and an
agreement on the environment.

3. (U) On May, 30, 2008, Peru and Singapore signed a trade
agreement. Negotiations between the two countries were completed on
August 29, 2007. The agreement enables Peruvian products to enter
Singapore duty free, as well as the rest of South East Asia, given
that Singapore holds one of the central ports for products entering
the region. President Alan Garcia remarked that this agreement will
test the capacity and ability of Peruvian industry to export its
diverse products to the Asian market.

Peru-China FTA May Be Completed in Two More Rounds
--------------------------------------------- -----
4. (U) The Minister of Trade and Tourism, Mercedes Araoz, announced
that Peru may be able to complete negotiations on a free trade
agreement with China with just two more rounds. She noted that the
two parties need only to clarify a few important aspects of the
agreement, primarily customs and tariff issues. Vice-Minister of
Trade and Tourism Eduardo Ferreyros said Peru had introduced a
customs cooperation agreement into the discussions with China during
the third round of negotiations held in Beijing last week. The next
round of negotiations will be held in Peru from June 28 to July 3.

Peru and Chile Moving Closer to Finalizing FTA
--------------------------------------------- -
5. (U) The Minister of Trade and Tourism, Mercedes Araoz, welcomed
comments made by the President of Chile, Michelle Bachelet regarding
the trade cooperation agreement between Chile and Peru. The
agreement, which is short of a full FTA, goes by ACE (acuerdo de
complementacion economica in Spanish) or economic facilitation
agreement. During an exclusive interview with CPN radio, the
Chilean President said she awaits the quick passage of the agreement
by her Senate. Further action on the agreement between Peru and
Chile is dependent on action by the Chilean Congress. The Chilean
Senate, in a pique over a border dispute, recently removed the
agreement from its 'fast track' procedures.

Imports Registered a 47% Growth in April
----------------------------------------
6. (U) In April, imports totaled US$2,265 million, an amount that
represents a 47% growth from the same period lst year. SUNAT
announced that this represents 51 months of consecutive positive
growth in imports. Capital goods and construction materials
represented the leading import products at 61.7%, followed by
consumer goods at 44.1%, and raw materials and intermediate products

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at 39.2%. The United States was the leading country of origin for
imports for the month, followed by China, Ecuador, Brazil, and
Argentina.

Overall Increases in Textile Exports from 2007
--------------------------------------------- -
7. (U) Peru reports increased diversification in exports of the
textile sector in the first trimester of the year, according to
ComexPeru, the Society for External Business of Peru. Overall,
ComexPeru reported sales of US$461.59 million in the first trimester
of the year, a 34.53% increase from the same period in 2007.

Exports of Fish Products Grew 15.9% in March
--------------------------------------------
8. (U) The Minister of Production, Rafael Rey, announced that
exports of fish products increased by 15.9% in March over the same
period in 2007. This rise is a result of a 20.2% increase in volume
of exports for fish meal.

Exports of National Software Grew 25% This Year
--------------------------------------------- --
9. (U) Peruvian exports of software reached US$ 31.25 million this
year, a 25% increase from last year. The General Manager of Graa y
Montero Digital (GMD) noted that software resulted in the largest
increase with services representing only a small percentage of this
increase. He remarked that the private and public sector are
working together to promote the national software industry abroad.
The General Manager noted that Chile, Mexico, Colombia, and
Argentina all have a law that promotes this technology industry,
whereas Peru does not.

18-25 Year Olds Buying More Electronics
---------------------------------------
10. (U) 18-25 year olds represent a new consumer segment with
growing strength in purchasing electric appliances and electronics.
A study, conducted by Arellano Marketing, revealed that 18-25 year
olds represent 29% of the consumer market for electronic appliances
in Lima. This group has a rising standard of living and an
increased presence in the labor force. Top products purchased by
18-25 year olds include: (45%) Small electronics such as MP3, MP4,
IPOD, calculators, PDAs; (28%) Video electronics such as DVD, Home
Theaters, Televisions; (19%) small electrical appliances such as
microwave ovens, vacuums, irons; (18%) audio equipment; (9%)
cellular telephones; (7%) cameras.

Peru Attracts New Spanish Investment
------------------------------------
11. (U) The top two sources of Foreign Direct Investment (FDI) in
Peru are Spain (27%; $4,392 million) and the United States (18%;
$2,883 million). The Embassy of Spain announced in early May that
at least ten new large and medium-sized Spanish businesses plan to
invest in Peru this year. Interests focus on the following sectors:
sanitation, infrastructure for ports and airports, consultant and
other services, hotels, hospitals, housing, energy, and agricultural
exports. The new investment will likely raise Spanish FDI to
US$4,622 million.

French Businesses Look to Peru, Not Just Lima
---------------------------------------------
12. (U) The French Embassy in Peru announced that the French
companies Suez Water and Veolia of France are interested in
investing in concessionary projects for potable water in Huachipa,
and in water services in La Chira and Taboada. In the last four
years the presence of French companies in Peru has increased by 50%.
The embassy cited Peru's economic development as the investment
attraction for French companies.

Brazil and Peru Partner on Hydro electrical Project
--------------------------------------------- ------
13. (U) Brazil has negotiated the construction of 15 Hydro
electrical plants in Peru. Peru and Brazil have reached agreement
on the construction of a first plant with future plans for the
construction of 14 additional plants. All of the energy created by
the plants will be destined for Brazil.

Mitsui of Japan to Construct Desalinization Plant
--------------------------------------------- ----
14. (U) Mitsui of Japan plans to construct a desalinization plant in
Chilca, south of Lima. Next week the Japanese company will present
its final proposal to the Ministry of Housing, Construction, and

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Sanitation. Mitsui has formed a consortium with several Korean
businesses to develop this project. The company is evaluating other
possibilities for private investment in water plants for other
regions in Peru including, Iquitos, Cusco, and Puno.

French, Austrian, and Czechs Interested in Water
--------------------------------------------- ---
15. (U) The European Union-Latin American Caribbean Summit held in
Lima during mid-May resulted in an increased interest by European
investors in Peru. French, Austrian, and Czech businesses have all
expressed interest to Peruvian government officials on investing in
the construction of water treatment plants in Peru.

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